Armed Forces - endowment policy sales

*Please note* This site is for information purposes only - we are not accepting any new cases from January 2007

Case study

The following case discusses a common situation involving an inappropriate sale of an endowment policy to a member of the Armed Forces.

The key factor in this case and many like it was that the policyholder owned no property and had no need of a mortgage. The clients in this case were subjected to what has become known as a "forward sale".

One of the clients was a member of Armed Forces and was stationed in Germany living in quarters with his young family.

They were sold an endowment policy even though they owned no property and had no mortgage. The premise for the sale was that, like most people, they would at some point probably obtain a mortgage and purchase a property.

The salesman sold the endowment on the basis that the clients could start paying for the mortgage immediately and long before they actually acquired a property. They would therefore reduce the mortgage repayment period and be financially better off by disposing of the mortgage debt earlier than would otherwise be the case.

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On the one hand you could not argue with the concept of a savings plan which involved putting money away for a future property purchase. But on the other hand, there were far simpler, shorter term savings products available on the market.

The clients needed a more flexible, cheaper product that was not subject to heavy up front fees that swallowed any savings benefits for the first few years. Over the years it has become accepted that this form of endowment sale was inappropriate. Recent adjudications and advice from the Ombudsman confirm that "forward selling" of endowments was bad practice and amounted to mis-selling.

Our clients in this case managed to recover all of their premiums paid up to the point that they did eventually obtain a mortgage (3 years after the sale). Interest was added to this amount. They also received a secondary award that related to the endowment advice itself which was flawed and subject to further arguments of mis-selling.

An award was made that reflected the mis-sale and effectively placed the clients in the same position they would have been in had they been sold a repayment mortgage. The total amount recovered by the clients was £12,660.

More endowment advice:

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• Endowment claim procedures
• How long to claim endowment misselling
• Endowment compensation
• Endowment claim success stories
• Endowment news
• Endowment policy matured below target
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• Specialist endowment assistance
• What happens when you complain about endowments
• Hows endowment compensation calculated
• Endowment attitude to risk

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